A Change in Reporting Structurehttp://www.theiia.org/intAuditor/ask-the-experts/2010/a-change-in-reporting-structure/
Blogen-usTue, 26 Jun 2012 08:12:39 AMTue, 26 Jun 2012 08:12:39 AMhttp://www.theiia.org/intAuditor/ask-the-experts/2010/a-change-in-reporting-structure/2012-06-20Sharing of Audit Rating for Feedback Prior to Issuance of Audit ReportsDear all, please guide in light of the international best practices that:-
1- Whether auditors should share audit ratings or not to auditee's Sr. management for their prior concurrence/feedback before issuance of final ratings in final audit reports?
2- Would this action will impair the independence of the auditors or not?
As I don't find any solution in PG on Formulating and Expressing Internal Audit Opinions and PG on Independence and Objectivity. http://www.theiia.org/intAuditor/ask-the-experts/2010/a-change-in-reporting-structure/2011-02-03A Change in CAE Reporting StructureI agree with what Mike Barry; Dan and others state namely the CAE ought to report to the Audit Committee as the CAE needs to be the "eyes" and “ears” of the Audit Committee and should enjoy full independence to do his/her job. Unfortunately many organizations do not follow what IIA recommended after various frauds perpetrated (that word was considered an "anathema" for audit community once!. This has become very conversant use today, after various frauds perpetrated by huge corporations like Enron (see the list http://www.corporatepredators.org/top100.html) that forced professional body of auditors to really focus on "independence" of auditors [including IIA’s recommendation] in corporate sector for the past 8 years. However, some corporations still follow the same "formula" to possibly cook books, with no one reporting it. SEC gets after them after many years, like they did with Bernard Madoff who defrauded billions of investor money. Probably the Audit Committee might want to watch over the CFO, because of that bitter investigation and bad publicity, and hence the CAE ought to meet with (with or with out the blessing of the CFO, which the CAE may never get; (redflag?)] to educate if the Audit Committee (if they did not know about the IIA recommendations) on CAE reporting structure. Since Jim received a call from the AC Chair affirming the committee’s full support of him and the internal audit function. The chair suggested they meet to discuss Jim’s vision and intended future direction for the audit function; also suggesting they communicate regularly outside the formal committee meetings to allow for open dialogue", Jim should respond over phone that he could accomplish the AC Chair's wishes, if the reporting structure is amended per IIA's recommended reporting lines and THEN prepare his proposal before surprising his CFO and CEO. I have done that successfully in my prior job and the Audit Chair changed the reporting structure to report directly to the Audit Committee at that same meeting for good!http://www.theiia.org/intAuditor/ask-the-experts/2010/a-change-in-reporting-structure/2010-06-30A Change in the Reporting StructureThe healthy environment of internal auditor and functions is this ,his reporting requirement should be implicit and composite of checking company's fund management and employment to its objective and not personal or throw away uses. Jim as CAE should not be required to report CFO, rather he should be required to report managing director but preferably executive committee of board of directors of the company. Internal audit function should be the line-management and should not be under the finance function , whose work and activity have to be watched as supervisory authority,which will carry independence of object of audit to the end user of authority ,like, board of directors. Further internal audit function should not conflicting to become useless and timeless attitude in the organization, rather it should be independent departments responsibilty to perform their tasks and standards.
Jim in his audit plan should outline the job tasks of 10 employees in the audit function of the company. Jim should report and show his expertise as executory approach of audit. He should review the existing system of internal controls and also he should suggest some improvement in the system , as accountable and acceptable aspects, to the audit committee.
He should include in his report , outline and analyse certain points from internal audit standards; he can include areas to watch and report which was lying pending; he can draft in his report certain financial indicators with analytical approach and any reason come arrive; he can include in his plan to measure and analyse the company's financial budget , by this he can manage to his give understanding an executory approach to the audit committee.
Regards
Rashid Pervez
ACIS,PFA, CA (finalist), ACMA (finalist)
Member IIA - Karachi Chapter, Karachi, Pakistan.
Tel: 9221-34821075
0333-2238406
Address : Flat#305, Block B-3, Savana City, Block 13-D-3, Gulshan-e-Iqbal, Karachi,Pakistan.